Good afternoon and welcome to the Full House Resorts Second Quarter Earnings Call. Today's call is being recorded. At this time, I would now like to turn the conference over to Lewis Fanger, Chief Financial Officer of Full House Resorts. You may begin.

Thank you and good afternoon, everyone. Welcome to our second quarter earnings call. As always, before we begin, we remind you that today's conference call may contain forward-looking statements that we are making under the Safe Harbor provision of federal securities laws. I would also like to remind you that the company's actual results could differ materially from the anticipated results in these forward-looking statements. Please see today's press release under the caption forward-looking statements for the discussion of risks that may affect our results. Also, we may make reference to non-GAAP measures such as adjusted EBITDA. For a reconciliation of those measures, please see our website as well as the various press releases that we issue. We're broadcasting this conference call at fullhouseresorts.com, where you can find today's earnings release, as well as all of our SEC filings. And then lastly, we did include a small handful of pictures as well, of our projects with some update photos. So you should be able to see that directly through the press release. You certainly can see him through our website via the press release or the SEC filing. With that said, we were ready to go Dan.

Okay. Well, I guess the main things that address everybody's attention to is really the headlines. That's the -- these two big projects. They're both coming along, taking a lot of our attention and time. By the time we talk at the end of the next quarter, we should be in the process of opening in Waukegan. And it'll be right about the time we report third quarter earnings, I think, so in the fourth quarter. And then a year from now we will be opening Chamonix. So they're very important. Each of them is probably going to contribute more in earnings than all of our existing five casinos combined. So that's the important part of the company. Second, we're sitting on about $300 million of cash between our cash on hand and our credit facilities and what we earned. We're very confident that we have more than enough money to finish construction of these two projects. I keep hearing these rumors that we're somehow going to raise money and we have no need to raise money and we certainly don't want to issue stock at these prices and we don't want to go to the debt market in these conditions. We have no need for it and we can complete all of these. We will need to raise money eventually to build the permanent one in Waukegan, but that's two years away. And we have a standby credit facility with a major investment company that I think we could do it on better terms than that. But if the bond market was bad, we could always turn to that. So, we don't need money. Our debt is essentially all fixed rate at this point. Not just essentially, I don't think we have any floating rate debt in the company,…

Fountain Square.

Fountain Square. It's an old shopping mall and it's 30 acres plus 10 that we acquired. So, it's 30 that we leased in the city and 10 we acquired. If you look at that Sprung structure to the left, you will see kind of a grassy area that's where the permanent casino goes. And the dirt area out in front will all be parking lots for The Temporary and eventually parking lots for the permanent. There is some stuff we are doing now. It's not major stuff, but there is some stuff we are doing now that is benefiting the permanent. For example, as we pave all this area, we have to put in some infrastructure to deal with storm water when it rains and so on. And that's really for the permanent but it has to go in now. And you can see in the distance a hotel, I forget which one that is. But right at Ballpark, there's a SpringHill Suites, a Town Center Suites, a Courtyard Hotel, a Sonesta Hotel, a Sonesta Suites Hotel and Hampton Inn. So we're kind of surrounded by hotels, which is why in our first phase, we don't actually have a hotel other than 20 highroller suites with little boutique hotel for highrollers. In The Temporary we will not have any hotel rooms, of course, it's about getting the slot machines open and running here as quick as possible. But if you look at a map, you'll see that we are in the center of Lake County. I mean, it's called Waukegan but it's Waukegan is the county seat for Lake County, which has about 700,000 people. It's one of the wealthier counties in the whole country. I believe it's the second wealthiest county in the State of Illinois. And we will be the only casino there. There are some towns in Lake County, including Waukegan that have slot machines in bars, you can have up to six per bar. And the ones in Waukegan do actually quite well, which I think bodes well for us, because if you go and look at what they are, it's usually just a dingy little bar with six slot machines in the back. And yet they're doing pretty well. And I think that bodes well for us. And then we will be -- even The Temporary casino which on the outside is pretty unimpressive. On the inside, we do have quite a bit of decor going in, so that we intend to be a positive surprise to people when they go in. And our competition is the Rivers Casino which does huge numbers like $500 million or $600 million a year.

$500 million.

Yes, and it's pretty nice, but they're on two levels, multiple rooms, they're kind of squeezed on pretty small footprint. And yet they do extremely well. And we're one big flat floor which is usually what the customers prefer. If you go up to Milwaukee to our North, the Potawatomi is having a pretty decent tribal casino. It's also different rooms multiple levels. If you go beyond those two, pretty much all the other competition and anywhere near us are old river boats that are 25 years old with low ceilings and multiple decks. And so even our Temporary casino compares pretty well with the competition, and our permanent casino will be head and shoulders above the competition. So that's that.

Before you move on down, I just want to make two quick points. One is, Dan is right about our location and not being riverboat. But what is quite nice is we're one of the few casinos that are located right off a major freeway. You can see our site right from the freeway. And if you compare that to the two big ones that I know of one is would be Rivers that makes $500 million a year in gaming revenue as Dan mentioned. The other is a relatively new one. It's the Hard Rock Casino in Gary, Indiana that opened in May of 2021. That's doing almost $400 million a year in gaming revenue.

It's a great platform right off the freeway.

That's exactly right. And that freeway location is quite key. Go ahead, Dan.

Yes. So the other thing is, if you pull up a population density map, you'll see obviously the suburbs of Chicago are very densely populated. To our North it gets less densely populated and to our West, it gets less densely populated. So we're kind of at the North end of the most densely populated suburbs. And so we think more of our customers come from the South than from the North. And it's a long gap between us and Rockford, where the temporary Hard Rock casino is operating, there's talk about the tribal casino out that way, doesn't have much impact on us. And we're between the two main freeways that run North-South in this area. And in fact, the commuting train lines come out of Chicago and go North and they fork about 10 miles South of us and the one fork goes up along the coast through Lake Forest and Lake Bluff and we'll keep going and on up to Milwaukee. The left fork goes out through Libertyville and kind of angles Northwest. And we're in the middle of the fork. And not surprisingly, the population tends to live along those train lines. Even though I think most people today don't commute into Chicago, but historically they did. And so the population centers tended to follow those train lines. And this is a great location relative to where everybody lives. The next pictures are of Chamonix and this is a complex building on a complex site in a complicated town. And we are between Bennett Avenue and -- let me hand this.

Carr Avenue.

Carr Avenue. And Carr is quite a bit higher than Bennett. So on the one picture, you'll see our parking garage with a crane in front of it. And the hotel rooms are just starting to go up above that. That's on Carr. And this picture is taken from 60 feet above the lowest part of our site. And yet it's all laid out in such a way that the customers will not perceive all of this. You go into the parking garage, you take the elevator down, you walk out of the casino. And the second picture shows the front of it. This is taller on the front than it is in the back because Bennett is lower than Carr. And you can see it's coming together to the right of the crane on the picture that shows the front. That taller building with the big windows in it, that's the casino and it ends up with big arched windows with sheer curtains where those openings are. And to the left is a specialty restaurant, spa and swimming pool, go on that structure. And obviously hotel rooms and hotel lobby on the center. And that building has now topped out. You can see in that picture to the right, the parking garage. And the other picture shows the back of that parking garage. And there's three levels of rooms that go on top of the parking garage and the first level is just about done. And then they'll start doing the second level. And then if you go to the rendering of what it looks like when it's done, you can see how there's essentially three buildings. The main one is the one in the middle. And that anchors the casino and has the spa and the restaurant. And…

We'll go to our first question from Ryan Sigdahl with Craig-Hallum Capital Group.

Curious -- appreciate the color on the projects, agree that's the focus. You mentioned in the press release that the launch dates have slipped a few weeks. Can you talk through that? I guess The Temporary I think previously it was expected late October, you're saying Q4 now. So can you just put a finer point on that launch timing?

That's right. We don't control everything and we're going as quickly as we can, but construction problems have their things arise. So the main thing that's been an issue for us, there was there was a union, I forget the full name of the union, it’s local 150 or something. They are the union that represents guys who crush rock. And you need crushed rock for both asphalt and concrete. And we need asphalt and concrete. And they were on strike for about six weeks. And as a result, the asphalt plants and the concrete plants were closed. And we need concrete and asphalt. We have some. We’ve bought some kind of anticipating it, which is how we were able to get a ring structure around and the structures that we have. They settled that strike about a week ago. And now the plants are ramping back up. And of course, they have a big backlog of stuff. We're trying to get it as quickly as possible. That's just one example. It seems like every day there's some phone call about something else, right? And you deal with it. And that's just a normal part of construction to be honest. And I think you've -- trying to build anything these days with all the supply chain issues is a challenge and we're fighting through it. And I think we had properly anticipated when we did the budgets and we had to increase the budget quite a bit in Chamonix when we realized how hard it would be to build. And based on that, we used a big contingency in Waukegan. So I think we had that but there's stuff like Con Edison told us they could not provide transformers. Con Edison could not buy transformers. And they weren't in up…

Yes, we're not that far off from where we were last quarter for what it's worth, Ryan. I think last quarter was in late October, early November. And despite those challenges that Dan mentioned, we're still -- we've come to satisfactory resolution on all those items and continue to target that same ballpark so.

So I mean, in Chamonix to give you another example, I get up there, I get to each of these places once or twice a month now because things are happening. And maybe a month ago, you can see from the pictures, we're using what's called light gauge steel, you erect this kind of steel structure, and then you pour a slab above it in the steel structure, it supports it. And so there's games with people and subcontractors who specialize in that direction of light gauge steel. And I'm up there and the young man who's in charge of this for Huntsville, Phelps is very smart, very hardworking, was frustrated because he was having to turn some of those teams away. Because the light gauge steel had not arrived on time and when we went back into it -- because the stuff is kind of manufactured off site and brought in on trucks and they didn't arrive on time. So we had workers ready to erect it and we didn't have the material for them to erect. And when we went back a step further, the guy doing the fabrication of that steel said, well, he didn't get his plans from our architects on time. When you finally traced it down, it was basically our architecture firm. I don't know, what they were working on, but there were like five guys who didn't get the plans out on time to the other people. And after I blew a fuse or two on that, we were able to try to get caught up. But you find stuff like that just slows you down some. And that's -- by the way that’s...

That's every project.

Every project. This is I think my 13th and 14th major casino projects and every one of them has kind of standard a little things like that, that you deal with. And, I mean, we had a fun one here. I was walking around Chamonix and I walked into the loading dock area that is designed for stuff to arrive, and I'm standing there -- and it's just in the early stages. It's just -- and I’m standing there looking at it, I just go, “Where's the dock.” And the construction guy is, “What do you mean?” I said, “Well, the truck backs in here and you need something that's 4 feet tall to take the pallets of stuff off the truck.” And he's looking at and he is just, “Oh my God, let's go look at the drawings.” We went and looked at the drawings and there was a space labeled loading dock, but there was no dock, right? And it was like just a mistake that somebody made and we are like, you need a thing, 4 feet tall for them to pull the pallet stuff. And so, we have now made that adjustment and the trucks come in and it's not a flat floor. It's a little bit of a ramped floor to get the truck down so that the -- that's just the normal, that doesn't really cost anything. But if you don't walk it, while it's under construction. And you'd say like, why does it take the CEO to discover that? Well, I screamed that a few times. Like what idiot architect did not put a dock in the loading dock and then how many people looked at this and didn't realize it. And then I finally had to discover it, walking it. Well, that's why you walk it. And God knows how many things are construction people discovered and fixed before I got there. And that's part of construction.

That's why we've done a lot of these.

I'll give you something else to ponder as we wrap up this question for you, Ryan. The next time that we talk to you and others on these earnings calls will be late October, early November. So, we'll be on the verge of either just about to open Waukegan or we will have a much more definitive date for you. So -- and I think unlike some other casinos we've built in our past and in most casinos, I do think that the ramp up period for this casino will be on the very short sight. Sometimes you might take 12 months or so before you fully ramp up a property. I think this will be a swift ramp and in part, because of the competitors that Dan mentioned and in part, because we are just so darn close to so many people.

Yes. It's pent-up demand. They have no existing casino. And I think we will ramp up pretty fast in Chamonix as well, but we are going to ramp up very fast in Waukegan. In Chamonix, there are existing casinos. We're just a lot nicer than any of the others so.

Got something else Ryan, or...

Good. Yes. For maybe my second question. Just curious what you are seeing on the demand side, if you have seen any deterioration in consumer behavior end of July? Dan, you mentioned kind of $20 million EBITDA done the first half. You are going to lose the $2 million of free play, but is that kind of a realistic as you look at the back half, what you see in current demand and everything going on with construction at your existing facilities?

Well, the stimulus checks benefited mostly the second quarter. They came out very late in the end of the first quarter. And so, like in July, we were still off a little in July, at the Silver Slipper in particular that I recall, I haven't...

Versus prior year, yes.

Versus prior year, but much -- but the decline was much less than it was in the second quarter. Now, is that recession? Generally the regional casinos hold up much better in recessions, because we're a cheap trick, it's easy for somebody to drive to us. There's usually three people per car. And whereas -- and we don't do a large convention business like Las Vegas, the convention business is the first thing that could sit in a recession. And so it's hard for us to tell, but I think our business is not really feeling much of an impact. There's -- year-over-year comparisons are getting easier because we're lapping the stimulus checks of last year. And just from last recessions, I think our business is pretty recession-resistant, because we're an inexpensive way to gamble.

Yes, I'll add Ryan. Sequentially, so not looking versus last year, but the last couple of months, things continue to be on a relatively similar trend. Pretty pleased with where -- it looks like July will have shaken out for us. The exception to that would be in Colorado where as you know, the construction disruption continues and we had a little bit of a separate problem where our construction created this weird river floodwater pattern that created some flooding issues in our casino over that 4th of July weekend. That wasn't helpful. But that set aside, things continue as we would have expected sequentially.

Yes. We also have a lot -- at least probably half of what was historically Bronco Billy's is closed. And part of that is closed because it becomes part of Chamonix. So it's under construction. But we also closed like the center part of Bronco Billy's to kind of do a light refresh of it. And it's still closed, but we're pulling it back together now. And so Bronco Billy's is operating at much smaller capacity than it normally had in the past.

Great. Thanks, Dan, Lewis. Good luck, guys. Look forward to catching up when The Temporary is about to open.

We'll take our next question from Chad Beynon with Macquarie.

This is actually Aaron on for Chad. Thanks for taking my question. With respect to the competition to The Temporary or to American Place, can you help us understand the situation in Kenosha where we've heard about potential development? But I think this would still need some major approvals, correct?

That's correct. It's the -- I don't know how they say it but the Menomi tribe…

Menominee.

Menominee, okay, I like Menomi better, which is they have a bingo oriented, bingo palace type of casino, North of Milwaukee quite a ways up. It's a relatively small casino. And they have tried to get into Kenosha before. And the Potawatomi who would be impacted by it the most, because they're just North of that. And Milwaukee killed it 10 years ago, it was an effort. So this time the Menomi is backed by the Seminoles who get involved in these things sometimes, and they said they're going to try to put a casino in Kenosha. And we think most of our customers come from the South and there's a pretty good gap of farmland between us and Kenosha. And so I don't think it has that big an impact on us. But I also think they are a long ways from having the governor's approval and putting land in trust and then actually building it. So I think it's a long ways from done. And I think a lot of uncertainty whether it ever happens. But even if it does happen, it doesn't really change our numbers very much.

Yes. I'll add a couple of other thoughts in there. I mean, traditionally -- well, two things, one, pull up that that Google satellite photo, and what you'll see is what Dan mentioned earlier, that's a lot of population density, right, where we are, going to the South, going to the West. But as you start to go North, up by -- up towards Kenosha, what you see is a lot of more farmland. And so from a density -- population density point of view, the density is where we are. Historically, what you'll see is casinos will do well, if you have quality, or distance, closeness on your side. And in this case, we'll have both. And so we feel pretty good for both of those reasons. The other thing I would maybe point out as well is if you're on a cusp city, where's Alex again, he lives in Wilmette. Our Head of Development lives over in the Chicago land area. But a lot of those cities that are there around Evanston and whatnot, you are, from a mileage point of view, probably a little bit closer to the Rivers Casino. But if you pull up a Google Map, what you'll see is a lot of yellow and red on the pads going towards downtown and a lot of people in that area, I think we're going to be predisposed to not want to travel towards downtown. And will end up spending a minute, maybe five minutes more, perhaps even less, actually, with traffic going our way instead. And so if you were to include some of those people that are on the cusp, I think that, that additional population will largely offset any impact that you'll get from that Kenosha tribe. So we still feel very, very good.

I guess the Seminoles funded the purchase of a piece of land, but it's pretty insignificant to the Seminoles. And -- but that's what's caused the publicity. The Potawatomi is - and go look at their website, they have a pretty serious casino. They're the only ones in Milwaukee. Milwaukee is a city of 2 million people. I'm guessing they make well north of $100 million a year of EBDIT at that place, it's a guess, but just from looking at it. So that's a pretty wealthy tribe. This would cut into them. So I think we're going to have a little tribal warfare here. And they're both in the State of Wisconsin, and you need the governor's sign off on it. And so -- and the governor has said he's not studied the issue yet. So it is a much more serious competitor for the Potawatomi because they have kind of a monopoly on Milwaukee at the moment. And Kenosha is kind of a distant suburb of Milwaukee. And so I think it's a long ways from done.

Yes. That process is going to take a very, very long time.

And then as follow-up, how are you thinking about the size of the Full House portfolio? Would there be benefits to potentially selling one of your smaller assets to help improve the balance sheet and allow you to spend more time on development?

Yes and no. I mean, frankly, the small assets we have would be principally the ones in Northern Nevada and they're kind of a nice cash cow. And it doesn't take a lot of our time. And we don't need to sell them. We don't need the money to be honest. And so, it's kind of like, if we did have money from selling an asset, I'm not sure what we do with it, and we don't really need it. And frankly, they are nice businesses as they are so.

So, I will say that the -- it always -- I always scratch my head a little bit because we get a lot of interest from people looking at those Northern Nevada assets specifically over in Fallon, a lot more than you would expect. And so -- but Dan is right. The -- from a time point of view and from a cash flow point of view, they are consistent for us and don't require too much of us.

And we have a good management team up there that they are kind of run jointly out of Tahoe but with a separate GM in Fallon. And we have fixed up both of them in the last five years. And so, they are both in pretty good shape, and we have a conference call for about an hour once a month with those properties and they do fine. And I get up there and visit maybe once or twice a year. So it's not like -- when I was CEO of Pinnacle, we had like 15 properties, including four in Argentina. And boy, sometimes you couldn't even remember which property you were talking about. We have five properties and we are building two, it's really not a strain. And so, it's not like we need to sell one for financing and it's not a thing we have to do to have more focus on what we are doing.

. And it appears there are no further questions at this time.

Okay. Well, thank you everybody. I think our stock is pretty cheap. That was kind of implied by my little analysis of how little we have to earn in the new places in order to justify the current stock price. And hopefully, we will earn much more than that. And the stock will rebound in the near future. In the meantime, we are going to get ready to open Waukegan so that next time we talk, it's either open or about to open. And then as I mentioned a year from now we will be open in Chamonix. So thank you very much, everybody.

This concludes today's call. Thank you for your participation. You may now disconnect.